Fintech is exploding.
It is a global industry, striving to change the future of finance.
…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.
Back to Europe now, and one of its most prominent economies: France. With its reputation as an important financial centre, its move into fintech is of considerable mention. Whilst it is often viewed as lagging behind counterparts such as the UK and Germany, the past few years has been monumental for French fintech development, with 2017 looking to be the best yet.
Aside from its massive population (and being Europe’s largest country when you add its various territories), France experiences the most tourist visits in the world (at least 75 million a year), possibly due to Paris’ Disneyland, its many ski resorts or indeed its renowned fine cuisine – 400 types of cheese, escargot, or frog legs – and superior wine, produced in the country since the days of the Romans. It is also home to half of the world’s roundabouts (who knew?) and such inventions from la Française include Braille, the parachute, the guillotine, the digital calculator and, very importantly, the world’s first public interactive computer. And the bikini, too, as a collaboration between fashion designer Jacques Heim and automotive engineer Louis Réard. Funnily enough, such ‘French’ things as French fries and the French kiss are just names, mainly used colloquially by neighbours-of-the-Channel, the English. Finally, it is illegal to name your pet pig Napoleon here, and who remembers this genuinely wonderful French entry from Eurovision 2014? It came, unjustifiably, last with 2 points. Zut alors!
The City of Fintech Love
Now down to the fintech nitty gritty. Statista notes that in 2017, the transaction value in the fintech market amounts to US$83,303 million, and is expected to show an annual growth rate of 14.9%, resulting in US$145,144 million by the year 2021. That same year, the potential number of fintech users is 57.3 million people, and already, the average transaction value per user in 2017 is US$1,154.98. France has over 6,000 technology startups, over 200 public and private incubation centres, and around €7 billion worth of private investment from French and European investors. There are over 150 fintechs currently operating here.
France is a major economic player within Europe (and the 6th largest economy in the world), with its capital Paris notably being one of the continent’s up-and-coming areas of fintech investment. The city of fintech love? Hopefully. As this report from Deloitte explains, Paris has an extremely high concentration of financial institutions and asset managers and is already established in the markets of payments, insurance and telecoms infrastructure, making it a pre-existing ecosystem for fintech with a wide talent pools of workers. Not only that, but its government and ministerial support is noteworthy, meaning its Global Innovation Index score is justifiably 18, and it is ranked 29th on the list of Global Financial Centres. All very well, but France’s position as one of Europe’s most influential powers should bolster Paris’ potential in years to come.
The French (Fintech) Revolution
2017 so far has, in fact, proven that French fintech is ready to ignite (as we shall see later), but let’s take it a back a couple of years to see how it has developed up until the present day.
Europe’s two big hitters on the scene have been the UK and Germany. In 2015, even with France’s US$71 million investment in fintech, it still places behind these two countries, but luckily the initiatives of various financial institutions were keen to avoid simply being followers. As we have seen from various countries, a nationwide fintech union is paramount to invigorating the fintech community; in 2015, France Fintech Association was established, due to the collaboration of 36 companies, and on top of this, the French government began its own initiatives to help budding entrepreneurs. As highlighted in this 2016 report from the Digital Finance Institute, these include:
- Funding for startups and improved research and development in technology
- Equity and debt financing from France’s public investment bank
- Favourable taxes on capital gains for investment
- High net-worth individuals have a 50% discount on investment in SMEs
- Corporate venture investments in SMEs can be spread across a five year time-span
- A startup immigration programme to attract foreign entrepreneurial talent, allowing support for setting up in Paris
- This support includes a free co-working office space and unconditional government grants
In addition, whilst fintech accelerators have been hard to come by up until this point, the government has launched a project dubbed La French Tech. The map on its website’s homepage shows multiple ‘metropolises’ within France from Lille to Toulouse via Nantes, but outside of the country’s borders, La French Tech initiative has tech incubators in 12 global hubs: San Francisco; New York; Montreal; London; Barcelona; Israel; Abidjan; Cape Town; Moscow; Hong Kong; Tokyo; and Seoul. Considering the advancements in financial technology within these cities, their collaboration with France can certainly spur on French fintech, too.
The country’s regulatory organisations are doing their utmost to help startups. Specifically, le Autorité de contrôle prudential et de resolution (ACPR) and le Autorité de marches financiers (AMF). The aims of these organisations are to establish a common structure amongst fintech startups, leading to a national fintech ethos and stategy, whilst also helping to reduce regulatory barriers. In June 2016, the ACPR created an initiative called Pôle Fintech Innovation and the AMF launched Fintech, Innovation et Compétitivité, both to assist entrepreneurs with regulatory issues. As has previously been cited in our World Series article about fintech in Singapore, on 27 March 2017, the Monetary Authority of Singapore (MAS) has signed an agreement with these regulatory agencies to boost the cooperation between France and Singapore to develop fintech and share information about trends and regulatory requirement so that both markets can flourish.
Similarly, the French government is focusing on the acceleration of the regulatory process, tailoring personalised regulations to assist specific fintechs rather than generic, strict regulatory requirements and have thus far excluded any plans for a UK FCA-style sandbox principle. In fact, to attract UK fintech companies to France, these French regulators have launched a so-called AGILITY program, offering a “2WeekTicket” (pre-authorisation fast-track procedures, an English-speaking service and instant access to AMF and ACPR included) to get them started. Also, in 2015, France’s fund of funds contributed €685 million euros to private venture capital funds for use in innovation, through the French Public Investment Bank (bpiFrance). Regulations allow bpiFrance to provide loans to fintech startups or invest in their share capital, and fintechs can partner with credit institutions and insurance companies. By streamlining regulations, there are clearly further permissions for entrepreneurs to obtain licenses, establish their companies with legitimacy and grow. Voila!
The Banque de France is also keen to bring fintech to the fore. According to Crowd Fund Insider, it has launched a blockchain experiment to “process SEPA payment identifiers”, and as of October 2016, the bank appointed a Chief Digital Officer to oversee the acceleration of digital transformation, a task also undertaken by many agencies including Finance Innovation, France Digitale, Financement Participatif France, the aforementioned France Fintech and the Paris Fintech Forum. Launched in July 2016 by ACPR and AMF, the Fintech Forum gathered 1700 participants from 35 countries to further the role of French fintech. Further developments include the launch of accelerator Techstars in Paris (in collaboration with Partech Ventures), as well as the imminent opening of Station F (coming summer 2017!) which – covering 30,000m² – is the world’s largest startup campus to incubate tech growth.
Between 2012 and 2016, CB Insights notes that the funding for French technology companies reached $6.07 billion across a huge 1,154 deals, and in the last year the volume of deals increased by 115%, as well as an increase of 62% in funding. In 2016, Paris as a city alone was responsible for investments of over $1 billion in 231 deals. To put that into perspective, here’s how the next cities fared in terms of their deals in 2016 (in descending order):
- Montpellier: 11 deals
- Grenoble: 8 deals
- Lille: 8 deals
- Lyon: 7 deals
- Nantes: 7 deals
- Marseille: 6 deals
Paris sure is a big deal, despite the spread of tech companies reaching all areas of the country; France’s total 2016 investments of $2.1 billion put it right behind second-placing Germany (with a total of $2.3 billion) and it was only second to the UK in terms of investment deals. The UK had an astronomical 909, but France’s 468 is a worthy contender, and will continue to grow.
Specifically for fintech in this three-man-race, 2016 saw startups raising €155 million, which was a significant increase from the €135 million raised the prior year, and funding for fintech companies in the third quarter of 2016 alone was €857 million – double the amount invested in Germany and oh-so-close to reaching the amount invested in UK fintechs: €919 million. It clearly isn’t very far off at all. A focus on digital disruption in France may be down to the fact that, in 2016, a measly 20% of the population visited their bank branch more than once a month, down from 62% in 2007. As we have seen in the series thus far, there is clearly a growing trend (particularly in Europe and Asia) for trust in digital companies rather than banks; banks must co-operate with disruptors in order to retain customers, who turn to new fintechs offering greater user experience and online and in-app efficiency.
2016 continually proved itself to be a pivotal year for France’s development in the space, and 2017 looks set to be even bigger. Business Insider wrote an insightful piece earlier this year about how France could be in a position to steal the ‘fintech crown’ from the UK, using insights from France’s digital minister Axelle Lemaire. As well as the previously detailed fintech-friendly regulations that could lure UK companies away, here are some further deductions from Lemaire:
- A new law introduced by the government has created a threshold below which no authorisation from regulators is needed to start up a business in fintech.
- The ability to hire (or fire) employees and to negotiate with labour unions has been made easier.
- 180 foreign entrepreneurs have already been granted France’s “Tech Ticket” package: a €45,000 grant and visa facilities.
- Since 2013, France has been funding a €20 billion program to launch super-fast internet country-wide.
- Corporation tax is to be cut from more than 33% to 28%.
- Further taxes are to be cut for employing staff in France and for shares distributed by startups to their employers.
- Angel investors will be able to invest in French startups tax-free.
Furthermore, it’s been fairly impossible to ignore European politics the past couple of years, and the election of Emmanuel Macron could similarly boost the country’s fintech efforts. As Forbes concludes, his former roles as an investment banker and Minister of the Economy, Finance and Industry shows he has a clear focus on the development of financial services, a focus justified by a meeting between Macron and founder of Lendix, Olivier Goy, where he is reported to have a vested interest in the development of the fintech sector. Hearsay? Perhaps, but Macron’s government has also been urged by Kantox CEO Philippe Gelis to buy solutions from fintech companies to help fund the public sector – a strategy Gelis sees as rudimentary. Nonetheless, Macron (“the Mozart of Finance”) has also shown experience in technological matters (for instance, advising the CEO of Atos to purchase Siemens IT in 2010), and considering fintech success in Europe is due to the ease of cross-border collaboration between EU states, Macron’s pro-EU stance should allow for such neighbourly innovation to continue along the same path.
Allez Les Bleus!
To roundup this dense Franco-fintech overview, here are France’s major investors and startups.
Firstly, those from the KPMG Fintech 100 2016 Report…
#32 – Lendix – Lendix allows private, professional and institutional investors target attractive returns, and helps SMEs find funding beyond those offered by banking institutions. Investors can lend between €20 to €1000 to each project and, once completed, repayments (interest and capital) are made monthly on investor’s Lendix account. It was founded in 2014 by its current CEO, Olivier Goy.
‘Emerging star’ – Fluo – Fluo provides a complete analysis of insurance contracts and comprehensive covers at the most competitive prices. It is integrated with travel agencies, PSPs, banks, market places and car rental companies. Users can also use Fluo’s mobile App. Fluo was founded in 2013 by Jehan de Castet (CEO) and Laurent Foisset.
‘Emerging star’ – Leetchi – A solution for the collection and managing of money in groups – a ‘Money Pot’ can be used to finance any project. The ‘MangoPay’ API provides payment solutions to those in the sharing economy, and Leetchi has over 1500 customers across Europe. It was founded in 2009 by Céline Lazorthes (CEO). The most digital French bank, Crédit Mutuel Arkea, invested €50m in Leetchi to take 86% of its capital. The founding team is still in charge – the perfect example of a bank/fintech collaboration.
…and now notable others:
Compte Nickel – An alternative bank account and means of payment in France, accredited by ACPR. It has over half a million customers and was founded in 2014 by Hugues le Bret, Ryan Boulanouar and Michel Calmo. As Bloomberg reports, in April 2017 BNP Paribas agreed to buy it for €200 million – the largest fintech acquisition in France.
FinexKap – A completely web-based platform offering a short-term capital funding solution, bringing together startups, SMEs and investors. It was founded in 2012 by Arthur de Catheu and Cédric Teissier with its HQ in Paris.
HiPay – A global payment provider which processes €2 billion annually across 150 countries and 220 payments types. It also offers customer insights via data analytics. 60% of HiPay’s activity is outside the domestic market, and it was the first French fintech to be publicly listed.
LemonWay – A complete, secure payment institution for any activity in the marketplace, e-commerce and crowdfunding sectors. Founded in 2007 by Sebastien Burlet, Antoine Orsini and Damien Guermonprez.
Marie Quantier – A platform for financial advisors which offers investment advice based on global macro-analysis of data and risk management, through use of AI. Founded in 2011 and (also) based in Paris.
Paymium – An online Bitcoin marketplace in accordance with EU regulation for payment services. It offers a reduction in transaction fees and secure bitcoin storage and transactions. You can also send bitcoin worldwide via email. Founded in 2011 by Pierre Noizat and Gonzague Granval.
SlimPay – A solution for subscriptions/recurring payments, using a sleek payment form for desktop and mobile. Also with its HQ in Paris, it was founded in 2009 by Jean-Louis Hoenen and Jerome Traisnel.
Sowefund – The first startup platform merging crowdfunding with investment professionals, which invests “in the business of tomorrow” in a huge amount of sectors including AI, fintech and financial services.
So, third place no more? It certainly looks like it could be that way. With post-Brexit, regulatory relaxation and an innovative President, France could become the Mont Blanc of Europe, topping Europe’s fintech revolution. Allez les Bleus!
If you have any thoughts about fintech in France, let us know in the comments below, or you can tweet us.
Check back soon for more instalments of The Fintech World Series!